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Posted by 48PW on Tuesday, March 10, 2009 at 10:42:13 :
In Reply to: O T Does money really exist posted by copey on Tuesday, March 10, 2009 at 06:34:03 :
From Wikipedia, a pretty good description on the situation.
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Fiat currency (fiat money) is money that exists because an authority or custom declares it to be money. (From the Latin fiat, which means "let it be done"). It achieves value because a government requires it in payment of taxes and says it can be used to pay debt or buy goods and services and because people trust that the value of the currency will be reasonably stable.[1]
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The problem of course with all fiat currencys is when confidence is lost in the issuing authority, which is just about the case we have at present. When confidence is lost in the value then hyper-inflation sets in, which is the scenario that is looming on our horizon.
A typical governmental reaction to inflation is wage and price controls such as Richard Nixon tried in the early 70's. These attempts ultimately fail.
As Bette Davis said once in a movie "Fasten your seat belts, its going to be a bumpy night"
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